Sector warns that proposed rise to national wage will ‘inflict significant damage’
Katy Morton
Early years organisations have warned that the plans to increase the minimum wage to £10.50 an hour, announced by the Chancellor yesterday, will lead to more nursery closures.
Speaking at the Conservative Party conference yesterday, the Sajid Javid announced that the Government would increase the national living wage to £10.50 an hour by 2024.
Announced as part of a package of measures to prepare for 'a post-Brexit future', he also revealed plans to lower the age at which workers are eligible for the national living wage from 25 to 21.
Currently the national living wage is £8.21 for workers aged 25 and over and £7.70 for those aged 21-24.
The Government will set out more details at the Budget 2019, the date of which has yet to be scheduled.
The announcement follows findings from a survey by Nursery World earlier this month which revealed that more than one in ten early years practitioners live in poverty with a household income of £17,000 or less.
Earlier in the year, Labour pledged to raise the national living wage to £10 an hour in 2020 and to include all workers under 18, who currently receive a minimum wage of £4.35.
Sector reaction
The Federation of Small Businesses warned that the Chancellor’s plan could make some small businesses unviable.
The Early Years Alliance, the National Day Nurseries Association (NDNA), and the Professional Association for Childcare and Early Years (PACEY) said that they feared the increase to the minimum wage would force settings to close their doors.
Neil Leitch, chief executive of the Alliance, said, ‘Pay differentials across the sector are so marginal that an increase in the national living wage often means that all staff within a childcare setting have to get a pay rise.
‘A few weeks ago, the Chancellor announced an extra £66 million in 2020 for early years education against a funding shortfall that currently stands at £662 million. We warned at the time that any national living wage increase would all but wipe out the extra funding, and today’s announcement confirms that money given with one hand has now been taken away with another.
‘There is no doubt that childcare professionals deserve a pay rise, but without proper funding of the Government’s flagship childcare schemes, this will inflict significant damage on the early years sector and there will be further closures.’
The National Day Nurseries Association (NDNA) said that continually raising the rate of pay and offering it to younger people will ‘sound alarm bells’ for many nursery providers.
‘The Government has a poor record on paying rates which cover the existing costs of delivery. If these higher staffing costs are not fully reflected in the hourly rates, more nurseries will be forced to close their doors’, said chief executive Purnima Tanuku.
‘Plans to widen eligibility for the national living wage to include 21-year-olds will bring in a further 16 per cent of the early years workforce, which will impact hugely on nursery business costs.
‘Our recent workforce survey showed that paying just the statutory minimum would have seen the average nursery’s costs rise by 9.5 per cent over the past three years. At the same time funding rates have stayed flat. As well as ensuring all their staff are paid the statutory increase, there is also a knock-on effect to those paid above that rate.’
Liz Bayram, chief executive of PACEY, said, 'The commitment to increase the national living wage has to be welcomed, as so many early years practitioners are on low-incomes and relying on in-work benefits to survive. But it must be accompanied by increased funding levels for providers delivering Government's early education entitlements. If not, the NLW increase will not be sustainable for these small businesses.
'It is a sorry state of affairs that so many talented practitioners are leaving the sector and the job they love to work in supermarkets or other jobs where they can earn more. Of equal concern would be the closure of more childcare settings, unable to manage the increase in wages and other overheads.'
National chairman of the Federation of Small Businesses (FSB) Mike Cherry said, ‘Those in sectors with tight margins and which are heavily labour-dependent, such as the care sector, will be particularly badly hit without support.
‘The Chancellor must now find ways to help those smaller businesses to meet his ambition, without deterring them from expanding and hiring more employees.
‘We are suggesting to the Government that it should uprate the Employment Allowance introduced by George Osborne to bring down the costs of employment, together with a National Insurance holiday for those that recruit those furthest from work – as promised in the 2017 Conservative Manifesto.
‘Any drop in age eligibility for the National Living Wage should be gradual. A sudden drop to 21 poses a real risk to jobs and the economy. Any reduction should be gradual, with the Low Pay Commission assessing the impact on employment levels after an initial reduction in the 25-year-old threshold before further changes are made.’
Writing on Twitter, the shadow chancellor John McDonnell said, ‘Pathetic attempt at catch up by Tories will fool nobody. Labour will introduce £10 as a minimum as soon as we take office and, rising with living costs, it will mean everyone over the age of 16 will be earning comfortably more than £10.50 an hour by 2024.’
Education announcements
Also speaking at the Conservative party conference was the education secretary Gavin Williamson.
Delivering his speech to the conference in Manchester, he announced plans to ‘super-charge’ further education over the next decade.
This includes:
- Making an extra £120m available to create an institute of technology in every part of the country, opening a total of 20 – one in each major city.
- Opening 11 new maths schools.
- Establishing an expert Skills and Productivity Board of leading industrialists and labour market economists to provide strategic advice on the skills and qualifications the country needs.
The NDNA spoke of its disappointment that the education secretary had very little to say about early years.
Head of policy and external relations Jonathan Broadbery said, ‘Last Friday’s comparative study by Christie & Co showed that the UK has the second lowest level of investment per child in early years despite expanding the number of so-called “free” hours being offered to parents. This speech failed to address the fact that funding rates have stagnated for the last four years, which is now threatening the sustainability of many providers.
‘The funded hours are not free for parents or providers and the Government needs to recognise this and invest in early education in a way that will support efforts to improve quality and outcomes, not short-change the sector expecting more for less.’